Don’t overreact to market downturns

The stock market has been a bit tumultuous during the last few days and can often lead many investors to make mistakes that could have drastic consequences on their financial future. The keys to surviving a stormy market are relatively easy.

How do successful investors handle a chaotic stock market?
Most successful investors remember that number 1 principle of investing - take a long term view and don’t get focused on what happens today or this week or even this month. Following the market daily and even worse, following your individual investment performance daily can lead to undue stress in a down market. Today’s losses can be made up just as quickly as they were lost.

What is a mistake that many can make during a time like this?
The biggest mistake is trying to time the market, getting in out all the time. The problem is that many sell at the lowest price and get back in when the market is higher, missing out on the opportunity to regain their losses. Constantly changing your portfolio positions or even investment strategy as a reaction to market conditions is never a winning strategy.

What should people consider whenever they are investing?
First and foremost, invest responsibility which means understanding what you hold in your investment portfolio - it can be tempting to look for investments that promise great returns, unfortunately many of those also have much higher risks and during a volatile market, you might not be able to ride out the wild swings in value. Understanding how your investments might perform is key to building a winning investment strategy that can weather stormy times.

Is there a way to lessen your exposure to market downturns?
One of the best strategies is to stay diversified with your investments or 401k allocations. This tactic usually minimizes the impact of any market downturn because you are invested in all types of investment products that protect your overall portfolio growth. Even in a down market, some investments are actually going up and there can even be an inverse relationship with some of your holdings in times like this.

What else can help investors feel more comfortable during market downturns?
Think about obtaining professional advice. A financial advisor can guide you through market volatility and help you construct a solid plan that meets your needs and situation. And it if gives you someone to talk to when the market does take a tumble. Plus, a financial advisor is going to help you position your portfolio to lessen the impact of any market tumble.